Tapered annual allowance: worked examples for 2025/26 and 2026/27

The tapered annual allowance is how the £60,000 standard allowance shrinks for higher earners. It runs off two income tests and a simple halving rule, so once you’ve got the right year’s thresholds the maths is quick. The catch is those thresholds — they’ve moved twice since 2020, so a worked example is only as good as the year it’s run against. The four cases below all come straight from the examples our engine checks to the penny on every commit, so you can lift the method and trust the numbers.

The rule (2023/24 onwards)

Two gates have to be failed before the taper does anything. Threshold income — broadly net income less the member’s own pension contributions — has to be over £200,000. And adjusted income — net income plus all pension input, including the employer’s — has to be over £260,000. Clear either test and your client keeps the full £60,000. Fail both and the allowance drops by £1 for every £2 of adjusted income above £260,000, down to a floor of £10,000. That floor is reached at £360,000 of adjusted income.

PTM057100 · FA 2004 s.228ZA

Example 1 — a partial taper (2025/26)

Take Priya. Her adjusted income is £280,000, her pension input for the year is £55,000, and her threshold income is comfortably over its gate — so the taper applies.

She’s £20,000 over the £260,000 line, and that halves to a £10,000 reduction — so her allowance is £50,000. Her £55,000 input clears it by £5,000, and that excess is taxed at her marginal rate. As an additional-rate taxpayer, that’s £2,250.

Example 2 — all the way to the floor (2025/26)

Now push the income higher. Marcus has adjusted income of £380,000. The raw reduction would wipe his allowance out completely — but it can’t fall below the £10,000 floor.

Anyone above £360,000 of adjusted income lands on the same £10,000 allowance; earning more makes no further difference. Marcus pays in £15,000, so he’s £5,000 over, and the charge is £2,250.

Example 3 — the taper meets carry forward (2025/26)

Carry forward rescues a lot of these cases. Elena has adjusted income of £300,000, which gives her a £40,000 tapered allowance, and she’s got unused allowance sitting in two earlier years.

Here’s the bit that catches people out: carry forward stacks on top of the tapered allowance — it never puts the £60,000 back. So it’s £40,000 tapered plus £17,000 brought forward, giving £57,000 of room. Her £58,000 input is still £1,000 over even after that, so there’s a £450 charge. The order it all gets used in — current year first, then the oldest year next — is worked through in taper and carry forward together.

PTM057100 (taper) · PTM055100 (carry forward) — figures engine-computed against the 2025/26 config

2026/27: the same arithmetic

Good news for next year — nothing has changed. The four taper parameters (threshold income £200,000, adjusted income £260,000, the £10,000 floor and the £60,000 standard allowance) all carry straight over into the 2026/27 config. So the same inputs give the same answers, and Elena’s £300,000 case lands on a £40,000 tapered allowance in 2026/27 too — that’s the worked case in that article. On the calculator itself, the title and live example roll to the current year on their own: the year stamp comes from the engine’s latest config, so the page can never quote a year that’s ahead of the numbers behind it.

Why 2022/23 is different

This matters because carry forward reaches three years back, into years where the rules weren’t the same. In 2022/23 the standard allowance was £40,000, the taper started at £240,000 of adjusted income, and the floor was £4,000. Same shape, different numbers:

A £22,000 input sits comfortably inside the £35,000 allowance, so there’s no charge — and £13,000 of unused allowance is left to carry into the next three years. The key point: that £13,000 is measured against the £35,000 the member actually had that year, not £60,000.

The mistake to avoid

The expensive one is working out a prior year’s unused allowance against the £60,000 figure when the member was tapered — or on the old £40,000 allowance — back then too. A £300,000 earner was almost certainly tapered in 2023/24, 2024/25 and 2025/26 as well, so their real unused allowance is whatever was left of each year’s own tapered figure. That’s often just a few thousand pounds, and sometimes nothing — not £60,000 minus contributions. The other one to watch is the threshold-income gate: at or below £200,000 of threshold income there’s no taper at all, whatever the adjusted income. So anything that pulls threshold income under that line — a personal contribution, say — can switch the taper off entirely.

You can run any of these on your own figures with the tapered annual allowance calculator and the carry forward calculator — each prior year is taken at its own year’s config.

PTM057100 · PTM055100 · PTM055200 (prior-year unused measured against that year’s tapered allowance)